On November 1, 2019, Gordon Co. collected $31,800 in cash from its tenant as an advance rent payment on its store location. The six-month lease period ends on April 30, 2020, at which time the contract may be renewed.

a. Use the horizontal model to record the effect of the six months of rent collected in advance on November 1, 2016 for Gordon Co.
b. Use the horizontal model to record the effect of the adjustment that will be made at the end of each month to show the amount of rent "earned" during the month for Gordon Co.
c. If a larger advance collection was received on November 1, 2016, that had covered a longer 18-month lease period (at the same amount of rent per month), how should Gordon Co. report the unearned rent amount on its December 31, 2016, balance sheet?

on 1 Nov there is no entry for the amount in the income statement because it is not yet earned only the balance sheet is affected + bank $31800 and + income received in advance ( liability) $31800

each month's rent = $31800/ 6month =$5300

18 months rent = 95400

unearned at december = 18 months - 2 months earned

= 95400- 10600

=$84,800

marvineetesh3 marvineetesh3 · Answer 2 · 2022-03-02T13:36:40+01:00

The horizontal income statement and balance sheet are given in the image below.

What is an income statement?

An income statement is one of the three essential parts of the financial statement which is employed for reporting a company's financial arrangement over a precise accounting period.

It is shown with the other two key statements, which are the balance sheet and the statement of cash flows.

Computation of each month's rent:

[tex]\text{Each Month's Rent} = \dfrac{\$31,800}{6\text{Months}}\\\\\text{Each Month's Rent} = \$5,300[/tex]

Then, 18 months rent = 95400

[tex]\text{Unearned at December} = 18 \text{Months} - 2 \text{Months Earned}\\\\\\\text{Unearned at December} =$95,400- \$10,600\\\\\text{Unearned at December} =$84,800[/tex]

Therefore, the income statement and balance sheet in a horizontal format are given in the image below.

Learn more about the Income statement, refer to:

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